Nordstrom Closes Canada And Plans New Technology As Strategy To Improve Results

Two recent Nordstrom
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announcements reflect management’s perspective on what is needed to improve results and deliver long-term shareholder value.

Nordstrom’s announced earlier this spring that they will close their six Canadian department stores and their seven Canadian Rack stores. Poor performance in this market is the driver for the closures which are slated to be completed by late June. Management called it a difficult decision but stated it will enable the organization to focus on its core U.S. business. Sales are already underway to move merchandise.

WWD estimates that about 2,500 co-workers will lose their jobs when the 13 stores close. The closures will reduce sales by about $400 million and generate a $35 million improvement in pre-tax earnings. However, closing costs are estimated at about $300 million to $350 million which will be recorded in the first quarter of 2023.

The company is also cutting its technology operation. The announcement coincides with the arrival of Jason Morris, who started this past Monday as the new technology officer.

It may seem surprising to hear of the hiring of a new technology leader at a time when staff cuts are taking place in the technology area. However, the reduction of tech workers is partially due to the closing of the Canadian operation and not a reflection of cutting back on development of new technologies.

Morris joins Nordstrom’s with 25 years of experience in technology for the retail industry. He was at Walmart
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for 16 years; in his final role there he served as Senior Vice President of Retail Technology. Now he will assume the responsibility to lead the Nordstrom tech team in the development of key programs that improve overall company efficiencies. His first task is overseeing in a roll-out of a radio-frequency identification system that will be company-wide later this year. It is said that this new initiative will make it easier to keep closer tabs on merchandise and help in the rapid reordering of hot selling products. All of that should help improve inventory management and reduce operating expenses.

Management feels it must invest in technology as it is a critical area for the company’s future success. The roll-out of the new radio frequency identification system is an important step in overall system enhancements and efficiencies. In fact, CEO Erik Nordstrom indicated that top 2023 priorities include improvements in inventory productivity and supply chain optimization. In both areas, technology will play a critical role in achieving success and meeting goals.

POSTSCRIPT: It is critical that the Nordstrom’s tech team delivers the Radio Frequency Identification Data (RFID) system which uses radio waves to identify products. Nordstrom’s in-stock position of wanted items lacked consistency and that has hurt sales performance and likely impacted margins as well. One hopes that new tech chief Morris has the manpower and tools to develop the project for the whole company. It should be in-place and tested before the critical fourth quarter.